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Changing Landscapes

This will be a year of rapid change and uncertainty for the NHS but the direction and scale of that change is finally becoming clear

Despite record spending the government ended up with massive deficits in the National Health Service (NHS) in 2006. Primary care witnessed the biggest shake up in living memory with major reform of pay systems introduced for general practitioners (GPs), hospital consultants and all other NHS staff.

Sir Nigel Crisp departed as Permanent Secretary and was replaced by David Nicholson, who began by spelling out the need for reform of acute hospitals in the Guardian newspaper. As 2006 drew to a close Patricia Hewitt, the beleaguered Health Secretary, put her reputation on the line by promising to bring the NHS back into financial balance by the end of March 2007.

This year will be `make or break' for the NHS and should witness the newly formed Primary Care Organisations (PCOs) make their mark in commissioning services in very different ways. It will be a year of more rapid change and uncertainties for the NHS, but the vision and direction is becoming clear. To this end, Pharmaceutical Marketing UK is running a new series of specially commissioned supplements to help readers make sense of the new NHS.

Since Labour decided to increase NHS spending, based on the NHS Plan and a major review of Service spending by Sir Derek Wanless, the drive has been to achieve significant reform of NHS practices in return for increased investment. In addition, with the creation of the Healthcare Commission (HC), all health providers were expected to deliver higher quality of care through better defined clinical standards and improved clinical governance. Coupled with these changes was the implementation of increased choice for patients and an enhanced role for patients and carers in shaping and governing the NHS. But what actually happened?

We now know that a significant amount of new NHS money was spent on staff pay. The new GP contract was meant to deliver enhanced services. The new consultant contract was meant to increase productivity, and Agenda for Change was intended to improve morale and performance for all other NHS staff.

At the start of 2007, Patricia Hewitt admitted that the GP contract had failed to deliver, suggesting that there should have been a cap on GP earnings. Most commentators suggest that the new consultants' contract has not generated commensurate increases in productivity and the health unions are far from delighted with the changes flowing from Agenda for Change.

A recent article in The Sunday Times suggests that just 32 per cent of patients are exercising any choice and a recent report from the National Audit Office indicates that many GPs demonstrate weak clinical governance in services. The government has also begun to recognise that acute general hospital services require radical change, with an urgent need to build better capacity in services outside hospitals, a message the public does not want to hear. In short, the reform agenda has not delivered so the push will be on enhancing services through increased competition. As Tony Blair leaves office a new prime minister, probably Gordon Brown, will have a narrow window in which to reveal an improved NHS before facing the voters in the next general election.

The government reforms of PCOs would see new organisations focusing much more on commissioning appropriate services for their regions and freeing themselves of provider functions between now and 2008. This will also be coupled with enhanced commissioning powers for GP practices working in clusters within each PCO. The GP commissioners who commission cost effectively will be able to retain savings to invest in enhanced services, new equipment or improvements to their premises to increase their capacity, eg, improved diagnostic services or employing extra specialist nurses or therapists.

PCOs were put through a 'fitness for purpose' process during 2006. The process, designed by management consultants, was supposed to measure objectively which PCO chief executives were most capable of fulfilling the new roles and to test that PCOs were in good shape for their enhanced commissioning roles. Through this process the number of PCOs in England has been reduced from around 310 down to 110. Defenders of this downsizing suggest that fewer and better resourced PCOs will be more effective in their commissioning capacity. A few of the newly appointed PCO chief executives, deemed fit for purpose, told me privately that their jobs are bloody awful and that the climate set by the Strategic Health Authorities (SHAs) is based on bullying and fear. If they are correct this does not auger well for the NHS in 2007.

Setting transparent tariffs
Commissioning decisions will be increasingly based on a set of NHS tariffs, where costs for specific procedures are clear and transparent. The tariff structure currently applies to acute hospital interventions, not mental health services. This will mean that any provider, NHS or independent, will have to meet the NHS tariff to get NHS business. In theory this should mean that providers who can offer best value for money and good quality standards will see real growth. Conversely, poor performers will shrink in numbers. Critics complain that this could destabilise a local health economy, leading to closure of some poor performing hospitals.

This will not be allowed to happen in an unplanned way. SHAs in England will keep an overview of services to their populations and if a hospital seems to be failing then it is likely that better providers will be able to take over and run it. Foundation Trusts will have greater freedom to expand by merging with other providers and thereby bring about improvements. By way of example, Moorfields Hospital Foundation Trust has recently opened a franchise hospital in Bahrain, offering high-quality ophthalmic services.

This year is also likely to witness wholesale rationalisation of district general hospitals across England. Improved technologies, better medicines and new rules on doctors' working hours will all conspire to bring about fewer and bigger super acute hospitals with the result that many less complex procedures will be undertaken in community hospitals and in GP surgeries.

The carrot to get GPs onside lies in giving them the power to commission more local `bread and butter' services, eg, elective surgery and simple diagnostic procedures. At the moment GP commissioning looks pretty weak. PCOs are reeling from their recent restructure and face enormous financial pressures. As a result, most GPs undertaking commissioning within PCOs have only notional budgets issued by the PCO and no real hard cash which they can control. After April 2007, when PCOs and SHAs receive their new financial allocations, it will be crucial to give practice-based commissioners real clout and real monies if GPs and their staff are to undertake more work outside the hospital setting. At a time of financial strain SHAs and PCOs might be reluctant to let practice-based commissioners have real devolved power. If they fail to do so a key plank of NHS reform will be badly compromised.

Many PCOs will relinquish their provider functions, allowing whole swathes of community services to be put out to tender, creating a plurality of providers. This should give commissioners greater choice and will lead, over time, to increased competition on both price and quality. The real question lies in the capacity of NHS commissioners and practice-based commissioners to do their job effectively. Commissioning in the old NHS was largely a paper-based exercise, based on the roll-over of previous spending. Changes in patterns of care were usually on the margins of services and radical challenge to the traditional power base of the acute hospital providers was rare.

In a new NHS where tariffs apply, and budgets are based on real activity, the skills of new commissioners will need to be more focused than ever before. Are there people in the new PCOs capable of this more complex role in a more quasi commercial world?


A surplus of doctors and nurses
The workforce in the health sector is becoming increasingly globalised, especially under an expanded European Union (EU). In the NHS front line clinical staff in all disciplines are facing redundancy. Many newly qualified nurses and doctors are struggling to find jobs in the Service. Many doctors from within Europe are now providing out-of-hours GP services and many are to be found in private sector diagnostic and treatment centres.

A New Year survey of the best 100 health employers by Nursing Times found many of the best doctors are now perceived to be working outside the NHS. Old certainties about employment in the NHS are coming to an end. If the UK is witnessing an oversupply of doctors and nurses then pressure to keep wage inflation under control will be real. As more private providers enter into NHS contracts, especially in primary care, pay structures for health professionals will become more flexible.

Pay accounts for 75 per cent of total NHS spending. Most GPs and hospital doctors have enjoyed relatively good pay rises in recent years, along with nurses and therapists. After 2008 the government, comprehensive spending review is likely to slow the rate of investment in the NHS. This will put pressure on the NHS to become more efficient if it is to compete with other non NHS providers. Any resulting action is likely to be opposed by the health unions, but all the signs point to a government that is determined to push market-like forces and greater commercial acumen on to a reluctant NHS.

Two recent policy developments provide examples of this. The Department of Health has now set up a new unit to identify and encourage entrepreneurs inside the NHS who might want to develop new service models in primary care. The unit has been holding conferences and seminars for such individuals and is giving modest cash support and training to help these trailblazers test their ideas in a new NHS. The government has also made it clear that in future all service providers will have to develop new skills to promote and market their services.

A new code of conduct for marketing the NHS brand at local level is currently out for public consultation. All this suggests that the old monopolistic NHS is coming to an end. The NHS of the future is likely to remain funded largely through general taxation, commissioned by publicly accountable bodies in the form of PCOs, and free at the point of need for patients. But the providers of local NHS services are set to change radically over the next few years. Competition, better quality, easier patient access and choice will be the key drivers in the NHS of tomorrow and the workforce of the NHS will have to embrace rapid change.

As NHS growth slows after 2008, costs will need to be contained by rationalising acute hospitals. This is where the big money is spent and where overspending has historically been at its most chronic. Across England communities are being consulted about reshaping their local hospital services and the public is deeply resistant to change, suspecting cost savings and cutbacks as the real reason for change, despite record amounts of their taxes going into the Service.

Patricia Hewitt and David Nicholson have repeatedly defended the need to reshape acute hospitals on the basis of patient safety and better services, but will the public accept this unpalatable message? The politics of this are also fraught with danger. Assuming Gordon Brown replaces Tony Blair, will Patricia Hewitt survive as Health Secretary to see this critical part of reform through to conclusion?

In December 2006, Hazel Blears, Chair of the labour party and a member of the cabinet, hit the streets with local protestors in her Salford constituency to resist changes proposed for her local hospitals. If a nervous cabinet minister is allowed to man the barricades against change then what will nervous labour backbenchers do in the run up to an election?

Of all the current NHS reform it is the changes to acute hospital provision that are the most vital, both clinically and financially in a post-2008 NHS. If the government can hold its nerve and see this through then the NHS should be in pretty good shape for the decades ahead. If the government backs off or fudges the need for real change then the very viability of a tax-funded NHS, free at the point of need, will be under increasing and severe strain.

Between 2007 and 2008 many new providers will enter the NHS and Foundation Trusts will increase and become more commercial. The customer base will shift dramatically over the years ahead. Good intelligence at local level in the sales and marketing sides of the industry will be essential to track new players and build relationships. Cost pressures on the NHS will be tough in 2007, after 2008 expect them to get tougher. Product pricing and placement in the NHS of tomorrow is set to become more demanding. Plan for it now.

NHS and other new providers will need to develop real commercial skills in the future. Marketing and promotion skills will be particularly important in the short to medium term. Pharma companies operate in the real commercial world and should think about how they might assist NHS and other providers to sharpen these skills.

Practice-based commissioning will go live in 2007 and again, local knowledge will be vital for GP practices exercising commissioning clout. As practice-based commissioning grows, influential GPs will want more say in what is purchased for their populations, including medicines. Assuming SHAs and PCOs do devolve real budgets and real authority to practices, they will be important customers for all companies. Finally, remember that the HC will be charged with monitoring performance in all providers to the NHS and Monitor will continue to assess the viability of Foundation Trusts. It is essential that teams in your company track, read, digest and scrutinise reports from these independent bodies. These reports will provide rich information about the state of the NHS around the country, enabling you to spot and work with the best and maybe assist those who might struggle in this brave new world.

The author
Ray Rowden is a health policy analyst and NHS Adviser to Managers in Partnership. The views expressed are personal.

7th February 2007


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